In September 1967, General Electric’s Virgil Day stepped to the podium at an industry conference in Chicago to discuss the state of labor relations in America. In a matter of no time, he widened his lens. “The twentieth century is two-thirds over this year,” Day told the group, his low voice filling the room. “Today’s kindergarten class will still be in its thirties when the year 2000 rolls around. What will be the dominant forces and trends during the final third of the century that lies ahead?”
Day, who as a private pilot was naturally inclined to take a high-altitude view of things, went on to pick out ten big-picture developments that he saw on the horizon. He talked, for instance, about the fate of poor minorities, noting that “the War on Poverty, not to mention recent riots, have quite properly absorbed the nation’s attention and revealed deep and unsolved problems.” He spoke of the need for learning to become a “lifelong process” for all adults. And he contemplated “greater mobility in every phase of American life”—not just in terms of the ascent of air travel and a huge expansion of the interstate-highway system, but the “enormous job mobility” and “changes in once-stable institutions” that were beginning to show themselves. In one community after another, Day said, “people have few lifetime ties anymore. Most of their experiences take the form of ‘passing through.’… They are not disturbed by not having roots. Loyalties to a hometown or a company or a union or a profession… are watered down or even nonexistent for many.”
It’s unclear whether Day’s audience realized how incredibly farsighted his remarks were. But if they had trouble imagining the future, there is little question that they would have understood what Day described as one of the most “important pressures on management decision making” facing them in the moment: a sharp rise in inflation.
Concern about mounting costs was nothing new, of course. It was a burst of inflation immediately after World War II that had led to the introduction of cost-of-living adjustments in labor contracts. And executives had long decried the “wage-price spiral” that unions were supposedly generating as workers continued to see large jumps in their earnings through the late 1950s and into the ’60s. But the reality was that inflation had been docile for many years, topping 3 percent just once since 1957 and averaging less than 1.5 percent a year from 1960 through 1965. Meanwhile, save for a mild recession from mid-1960 into early 1961, the economy remained strong—and, in fact, for years seemed to be getting even stronger.
President Kennedy had come into office arguing that the Golden Age of the 1950s hadn’t actually been golden enough, and he promised to “get the country moving again.” The “New Economics” put forth by his administration (and later advanced by President Johnson) sought to ramp up economic growth through tax cuts and spending increases and a more relaxed stance at the Federal Reserve—all of it carefully engineered by the biggest brains in government, who would fiddle with the dials at their disposal and “fine-tune” things to ensure the nation’s continuing good fortune. “With proper fiscal and monetary policies,” said economist Paul Samuelson, a Nobel laureate and an adviser to Kennedy and Johnson, “our economy can have full employment and whatever rate of… growth it wants.”
Although such assertions highlighted the hubris of the president’s men—convinced that they were “effectively abolishing the business cycle,” as historian Wyatt Wells has put it—their master plan worked, for a time anyway. From 1961 through 1966, the economy had expanded at an average rate of more than 5 percent a year, a very healthy pace. The unemployment rate, which had hit more than 6.5 percent in the early part of the decade, had fallen back to less than 4 percent by ’66. Time even put John Maynard Keynes, patron saint of the New Economics, on its cover in late 1965. “In Washington,” the magazine declared, “the men who formulate the nation’s economic policies have used Keynesian principles not only to avoid the violent cycles of prewar days but to produce a phenomenal economic growth and to achieve remarkably stable prices. In 1965 they skillfully applied Keynes’s ideas—together with a number of their own invention—to lift the nation through the fifth, and best, consecutive year of the most sizable, prolonged, and widely distributed prosperity in history.” Indeed, by the time Day made his remarks, the United States was in the midst of an economic expansion that would span 106 months—a record at the time.
“Now, however,” Day warned, “we face a new ballgame”—one that, if not mitigated, could well prove “ruinous.” He rattled off the statistics: Wage increases negotiated with the major unions had been on a steady upward march, climbing from a shade under 3 percent in 1961 to 4.5 percent in 1966. Some industries, including the airlines and telephone and electrical companies, had seen upsurges of 5 percent. And in rubber and railroads, the gains had been more like 6 percent. Arthur Burns, who had served as chairman of President Eisenhower’s Council of Economic Advisers, expressed fear that America was on “the threshold of a wage explosion.”
Practitioners of the New Economics hadn’t been oblivious to these dangers. In 1962, the president’s Council of Economic Advisers had issued guideposts that urged business to hold down prices and labor to be sensitive that wages didn’t go up any faster than productivity. (General Electric went even further, saying that heightened “challenges of competition from abroad… call for compensation increases that are less than the increase in the nation’s productivity, rather than increases that are simply noninflationary.”) Some complied. Early in ’62, after an appeal from the Kennedy administration, the United Steelworkers agreed to a new contract that contained only a modest improvement in fringe benefits and no across-the-board bump in wages—the first time that had happened in two decades. Kennedy praised the union’s “high industrial statesmanship,” and it was generally presumed that the steel companies would now do their part and keep the lid on prices.
Less than two weeks later, however, Kennedy got a surprise visit from Roger Blough, the chief executive of US Steel. The company, he informed the president, was raising prices by six dollars a ton, or 3.5 percent. Kennedy erupted. “You made a terrible mistake,” he told Blough. “You double-crossed me.” As Kennedy paced the Oval Office after Blough had left, he got even hotter. “He fucked me,” the president told Arthur Goldberg, his labor secretary. “They fucked us, and we’ve got to try to fuck them.” The incident would lead, as well, to one of Kennedy’s most notorious comments: “My father told me that all businessmen were sons-of-bitches. But I never believed it till now.” (In response, some began wearing buttons that said “S.O.B. Club” for “Sons of Business.”)
Bethlehem Steel and four other companies followed US Steel’s move, and Kennedy retaliated. “In this serious hour in our nation’s history,” the president said in a televised appearance, “when we are confronted with grave crises in Berlin and Southeast Asia, when we are… asking union members to hold down their wage requests, at a time when restraint and sacrifice are being asked of every citizen, the American people will find it hard, as I do, to accept a situation in which a tiny handful of steel executives whose pursuit of private power and profit exceeds their sense of public responsibility can show such utter contempt for the interests of 185 million Americans.” Kennedy’s scolding was the least of it. He ordered the Justice Department and Federal Trade Commission to investigate possible antitrust violations, and government agents raided corporate offices to search through executives’ records. The Pentagon cancelled its contracts with US Steel. The president also approached Inland Steel, Kaiser Steel, and others in the industry that hadn’t yet raised prices, coaxing them to hold the line and undersell their rivals. Just three days after Blough had called on the White House, word came down that US Steel and Bethlehem were rescinding their price hikes. The steel barons had been broken; Kennedy had won.
For all of the political theater, Kennedy seems to have dug in against the steel companies more because he felt personally slighted than because of some firmly held conviction about inflation. Compared with President Eisenhower, who truly believed that the federal budget should be balanced so as to keep the economy from overheating, Kennedy and his counselors were far more focused on promoting growth and stifling unemployment. “Inflation,” said James Tobin, a member of Kennedy’s Council of Economic Advisers and another Nobel Prize winner, “is greatly exaggerated as a social evil. Even while prices are rising year after year, the economy is producing more and more the goods, services, and jobs that meet people’s needs. That, after all, is its real purpose.”
By the second half of the 1960s, though, inflation was becoming too severe to shrug off—the result, in large part, of an economy overstimulated by copious amounts of government spending on Great Society social programs as well as the Vietnam War. “The famous debate between ‘guns and butter’ was left unresolved,” the journalist William Greider has observed. “The people got both.” President Johnson did his best to corral prices. Taking a page from President Kennedy, he waded into contract negotiations between the Steelworkers and management in 1965 and pressed the two sides into a deal that fell within his wage-price guideposts. Later, he successfully bullied Bethlehem Steel into pulling back on a price increase, and then he did the same with aluminum and copper companies. No part of the economy was too small or too obscure for Johnson to insert himself. When the price of lamb rose, the president told Defense Secretary Robert McNamara to order cheaper meat from New Zealand for the troops in Vietnam. When egg prices shot up, Johnson had the surgeon general speak out on the hazards of high cholesterol.
Still, even the steamroller that was LBJ could flatten inflation only so much. In the summer of 1966, in an attempt to settle an airline industry strike, Johnson ignored his own guideposts, which called for wage-and-benefit increases of about 3 percent. Looking past that cutoff, the president endorsed a package of more than 4 percent. In the end, the carriers and machinists union settled on 5 percent. The head of the machinists, Roy Siemiller, insisted that the agreement “will not cause inflation.” If anything, he added, “there should have been more.” Yet Siemiller also acknowledged that the accord “effectively and thoroughly shreds the so-called wage guidelines.”
And so it did. Suddenly feeling more confident, the steel industry increased prices—and the White House could do little this time but frown. “No one can force them to do something they don’t want to do,” said Bill Moyers, the president’s press secretary.
The top had popped off the kettle. In 1967, consumer prices ticked up by more than 3 percent, and then they rose by over 4 percent in 1968—and were headed higher still. Virgil Day’s trenchant assessment in Chicago was looking, more and more, to have been right on the mark: “Whether or not Washington’s New Economics may have been successful in minimizing unemployment,” he’d said, “it has been conspicuously deficient in coping with the new phenomenon of rising prices.”
As President Nixon took office in 1969, inflation was the nation’s biggest economic malady. But much like his Democratic predecessors, the Republican was more intent on keeping unemployment low than attacking rising prices. “When you talk about inflation in the abstract, it is hard to make people understand,” Nixon explained. “But when unemployment goes up one-half of one percent, that’s dynamite.” And so Nixon opted for a policy of “gradualism” in which the new administration sought to put the brakes on the economy by cutting the budget and increasing taxes while the Federal Reserve tightened the money supply—but all of it executed with a touch light enough that the country wouldn’t veer into recession. “We want to level things off,” Nixon said, “not shake them up and down.” At the same time, Nixon pledged to stay out of labor disputes, saying that he didn’t want to “jawbone” business and labor into submission, as Presidents Kennedy and Johnson had done.
By the fall, Nixon and his men, along with officials at the Federal Reserve, were claiming that their approach was now kicking in. In the third quarter of 1969, wholesale and consumer prices both accelerated less quickly than they had before. And it looked like inflation would continue to moderate, what with government spending going down, taxes staying up, and credit harder to come by. The nation, Federal Reserve chairman William McChesney Martin told Congress in September, was “at the tail end” of its inflationary frenzy. “We’re making slow and steady progress,” he said. Life relayed that “a consensus is now developing among economists that Nixon’s… medicine is beginning to have its intended effect.… They are on the right course, and it’s no time to change it.”
But for all that optimism, the administration’s handle on wages and prices was tenuous at best, and Nixon leaned on corporate and union leaders to remember that “inflation is everybody’s problem”—not just Washington’s. The president emphasized that he wasn’t planning to institute wage and price controls, which he said were “bad for business, bad for the workingman, and bad for the consumer.” He didn’t even want to go so far as to reestablish formal government guideposts. Nonetheless, Nixon impressed upon the private sector that it must join his administration in combating the high cost of living. “The business that commits errors in pricing on the up side, expecting to be bailed out by inflation, is going to find itself in a poor competitive position,” the president cautioned. As for labor, he said, “it is in the interest of every union leader and workingman to avoid wage demands that will reduce the purchasing power of his dollar and reduce the number of job opportunities.”
Getting either side to fall in line was tough. The rate of inflation may have slowed, but prices were still going up. The same week that Martin, the Fed chair, offered lawmakers his hopeful reading of the economy, General Motors said it would raise the sticker price on its 1970 models by an average of nearly 4 percent—the largest spike in more than ten years. Also that week, GE increased the price of its ranges, refrigerators, freezers, and washing machines by about 3 percent. The nation’s airlines announced higher fares, as well, and coffee producers boosted the price of beans. With workers continuing to lag behind, no labor leader felt as if he could compromise at the bargaining table, regardless of what Nixon had to say about inflation starting to wane. If anybody were to pull a punch based on the prospect of better days in the future, “he isn’t going to be the head of that union very long,” said George Meany, president of the AFL-CIO. Walter Reuther of the Auto Workers was typical: “We are going to… get our equity,” he said, “and we don’t care what business’s attitude may be or what the attitude of the Nixon administration may be.” Another union official broke it down like this: “Our people can know all they need to know about inflation at the supermarket. Nixon tells them he is licking inflation and the next day prices take another big jump.”
And so labor pushed—and often prevailed. Unit labor costs (the amount of money needed to pay employees to make one unit of output, a single widget) began to escalate: after edging up less than 1 percent on average from 1960 through 1965, this critical measure leaped by nearly 3 percent in 1966, more than 3.5 percent the following year, and more than 4.5 percent in 1968. By the end of 1969, it was on track to increase by 7 percent. When it came down to it, corporate America was still taking care of its employees. But “perversely,” the business columnist Robert Samuelson has written, the “social contract became a conveyer belt for higher inflation.”
Whether wages were chasing prices or prices were chasing wages, neither business nor labor was ready to back down—and each side accused the other of the same deadly sin: greed. “The source of the problem is not the fact that American workers are fighting for their legitimate wage claims,” said Reuther, but it’s the “giant corporations of America who control the marketplace and… keep raising prices to maximize their profits.” To corporate executives, however, fault resided with union officials who were trying to maximize their members’ incomes beyond reason. “What is happening,” said Fortune magazine, “is that organized labor is overreaching.”
Desperate to reverse the tide, business in 1969 took aim at a key catalyst for inflation: construction costs. Because of the vast influence of unions in the industry—the US Chamber of Commerce slammed them as “the most powerful oligarchy in the country”—compensation in the building trades was rocketing upward at an annual rate of 10 percent. In turn, unions in other sectors felt compelled to keep up with the hard hats. As George Morris, director of labor relations at General Motors, recounted: workers in construction would see their brethren in the auto plants and “irritate them, so that our electrician goes down to his UAW local and says, ‘Goddamn. How come that guy gets $8.50 an hour and I get $5.80?’” The Construction Users Anti-Inflation Roundtable was formed to counteract all of this by coordinating labor relations across corporate America and by lobbying for changes in public policy that might rein in “runaway wages.” The group swore that it had no “antiunion” bias, but its statements and activities indicated otherwise.
Roger Blough, who had recently retired from US Steel, was the head of the group, which became known among executives as “Roger’s Roundtable.” But it was hardly a one-man show. Representatives from more than one hundred top companies were involved, including Eastman Kodak, Coca-Cola, General Motors, and General Electric. GE’s Virgil Day—a protégé of Lem Boulware and a fan of his firebrand variety of conservatism—demonstrated particular enthusiasm for the cause, speaking on the organization’s behalf when he labeled the union hiring hall “the root of all evil in the construction industry.”
At one point, President Nixon would suspend the Davis-Bacon Act, a Depression-era law mandating that workers on federal public-works projects be paid prevailing local wages and benefits—a way to prevent contractors from bringing in cheap labor. Blough took credit for the president’s action, but there was really only so much impact that this kind of government intervention could have. “We’ve made progress, but too little,” Blough conceded.
The real fight against higher inflation was to unfold company by company, contract by contract. And the next year was set to bring one trial after the next: a series of expiring labor agreements covering more than 1 million workers in construction, 450,000 in trucking, 70,000 in the rubber industry, 75,000 among the nation’s meatpackers, 100,000 making farm equipment, and 600,000 in autos.
The first proving ground, though, lay right outside Virgil Day’s door: in October, GE made its opening offer in negotiations with a group of unions representing 147,000 workers at 280 plants in 33 states. The New York Times called it “an acid test for Nixon’s plea for ‘restraint.’” Any pact eventually reached, the paper said, was bound to have “a crucial effect on the success or failure of President Nixon’s” program for “checking the wage-price spiral.” Yet for the unions involved, especially the International Union of Electrical Workers, squaring off against GE carried additional stakes that were every bit as high. Played right, this was their chance to finally put an end to Boulwarism.
General Electric’s 1955 labor contract—celebrated as a “splendid settlement” by both the company’s Lem Boulware and James Carey of the IUE—was, in retrospect, a clear aberration, a single flower that had bloomed during America’s short season of industrial peace. It had then wilted fast.
In the years since, big business had taken its “hard line” against organized labor, with many companies inspired by Boulware’s bargaining tactics: going directly to the rank-and-file to hear workers’ wishes and to lay out the views of management; subsequently making an offer that GE unilaterally proclaimed was “feasible and fair”—and more or less firm and final; and doing away, wherever possible, with the back-and-forth that typified most union negotiations. GE called its process “truthful and forthright.” The IUE termed it “brainwashing.” And by the next contract talks, in 1960, Carey and his union colleagues were more determined than ever to force GE to change its practices. “From our viewpoint,” the IUE said, “this is a struggle for the survival not only of our union but for the union movement in America.”
The two sides were far apart from the start in ’60. The IUE was looking for a two-year contract, with annual wage gains of 3.5 percent, a supplemental unemployment benefits program, and a renewal of the cost-of-living escalator that it had secured in 1955. GE had offered a three-year deal featuring a wage increase of 3 percent immediately and another 4 percent down the line, along with a job retraining initiative and some improvements in benefits. The COLA, GE argued, had become too expensive to continue.
The company had presented its proposal in August and, as was its wont, hadn’t altered its offer since—even with an October strike deadline fast approaching. “You think there is something else coming,” Philip Moore, GE’s chief negotiator, told Carey as talks broke down. “Well, there isn’t now, next week, next month, or any other time. Now get that through your thick head.” Whether Carey was thickheaded or not, he was as hotheaded as ever. At certain points, his screaming in the negotiating room got so loud, he could be heard through a double-block wall that supposedly had been soundproofed.
The IUE went out on strike a minute after midnight on Sunday, October 2. It was the first major walkout at the company since 1946—the event that had precipitated the advent of Boulwarism. GE said that it would keep its plants open and that anyone who came to work would receive the pay and benefits that the company had offered back in August. On the picket lines, things degenerated in a hurry. At a GE factory in Ohio, pickets jabbed those who dared to enter the facility with hatpins. At the company’s Electronics Park complex in Syracuse, New York, union loyalists broke automobile windows and scattered nails. Outside two GE factories in Massachusetts, IUE members tried to form human barricades and block people from entering. In Pittsfield, six people were arrested and charged with assault and battery as fistfights broke out. In Lynn, police made space for carloads of nonstrikers to get through, and the pickets menaced those who passed. “You are marked men,” they shouted. “We’ll remember you.” They also deflated their tires.
But it was the IUE that soon saw the air rush out of things. Support for the strike among various union locals had been lukewarm at best, most notably at the largest of them all: IUE Local 301 in Schenectady, New York, which represented nearly 9,000 workers. Leo Jandreau, the head of Local 301, at first refused to join the strike, saying that Carey “did not have the issues or the organizational strength or the other economic factors that are necessary” to make a work stoppage effective. After a few days Jandreau did agree to participate—but then in the midst of the strike he pulled an about-face and his members returned to their jobs. “Carey,” he said, “is on a suicidal expedition that will weaken the IUE.” Back-to-work drives began to materialize in other locations around the country as well. Just as he had during the early 1950s, Carey was losing his grip over the IUE.
Carey called Jandreau a “Benedict Arnold” and predicted that “to decent union members his name will be a symbol of infamy.” But the dressing down didn’t have any consequence. Three weeks into the walkout, Carey caved. In spite of his insistence to GE before the strike that “all of our demands are musts,” the union chief settled for what the company had been offering all along—a total yielding. GE was careful not to brag. “Nobody ever wins this sort of thing,” Moore said. But the New York Times characterized it as “the worst setback any union has received in a nationwide strike since World War II.”
Carey, however, wasn’t done. The IUE filed a complaint with the National Labor Relations Board, alleging that GE had violated the law by refusing to bargain in good faith. The union had tried to bring such charges in the past, but they’d never stuck. This time they did. In 1961, the NLRB’s general counsel took up the case as his own, scouring for evidence that GE had engaged in unfair labor practices. He didn’t have to dig far. The transcript of the 1960 negotiating sessions between the IUE and GE was filled with passages like this:
JANDREAU. Mr. Moore, can I ask a question? Is it possible to change the company proposal one way or another? I ask this because you said to me and McManus that this is it. It is all on the table. Is there any chance of changing your position one iota?
MOORE. There are two things, Mr. Jandreau. After all our month of bargaining and after telling the employees… that this is it, we would look ridiculous to change it at this late date; and secondly the answer is no. We aren’t changing anything come a strike or high water.
GE had stonewalled in other ways, too. An IUE request for an estimate on the portion of the workforce that was to be covered by a certain benefit program, for example, brought the following reply from Moore: “Somewhere between zero and 100 percent.”
Yet the case against GE was not only that the company was obstinate. At issue was the essence of Boulwarism—the way GE would go straight to its employees to gauge how they felt regarding wages and benefits and other workplace concerns, and then spell out for them in a barrage of articles, editorials, cartoons, radio and television broadcasts, telephone messages, and letters home why they were going to get what they were going to get.
In April 1963, an NLRB trial examiner ruled that the company had broken the law, citing, among other things, its outreach to workers. “The very massiveness of the communications” undertaken by GE, he found, “is itself a measure” of the company’s “determination to deal essentially, not with the employees through the union, but with the union through the employees.” GE’s goal, he concluded, was “to undercut not only the union’s bargaining position, but its authority as bargaining agent.”
GE appealed, and in December 1964, the full NLRB upheld the trial examiner’s decision. By this time, Lem Boulware was retired from GE. But his successors—above all, Virgil Day—were more than ready to defend Boulwarism. The way they saw it, the NLRB had erred on the facts. Plenty of times over the years, they pointed out, the company had revised a contract offer, at least at the margins. There is a “common misrepresentation which portrays us as starting with a proposal, which we then allegedly refuse to alter,” Day said. “We do modify and have made various concessions… in light of discussion with the union or new information a union may provide—but not just to ‘prove’ that we are bargaining.” Even more fundamentally, GE was horrified that the NLRB would seek to interfere with the company communicating “fully and frankly” with its own workers.
The media rushed to GE’s defense. The Detroit Free Press said that the NLRB had “gotten onto dangerous ground” with its decision. The St. Louis Globe Democrat accused the labor board of “arbitrary censorship.” The New York World Telegram asked: “Do you know that free speech is guaranteed to everyone in the United States by the First Amendment of the Constitution—except managers of business?” The Washington Post said that the NLRB “has gone far beyond the boundaries of the Wagner Act and is, in effect, telling parties how they must bargain.”
Yet while GE found instant comfort in the court of public opinion, it would get no swift answers in a court of law. The company’s appeal of the NLRB’s ruling made its way slowly through the federal judiciary, in part because the IUE and the company clashed over which circuit the case should be litigated in. That took more than a year to sort out. Another year and a half went by as the parties tried unsuccessfully to settle. At last, arguments were heard by the federal Court of Appeals in New York in June 1969—just as the latest round of contract talks between GE and the IUE were about to get underway.
Much had occurred since the controversy began. The IUE and GE had agreed on two other contracts, one in 1963 and another in 1966, without nearly as much furor as before. What’s more, in addition to Lem Boulware now being out of the game, so was Jim Carey—only he hadn’t been sent off in nearly as flattering a fashion as his nemesis from GE. As Boulware headed into retirement, he was not only held in high regard inside the company; he had also become something of a legend within conservative circles. “If it’s the last thing I do,” the National Review’s William Buckley told Boulware a few months before he left GE, “I’ll build a statue with your name on it.” Carey’s undoing had come in 1965, with the IUE racked by ever more infighting. For a while, the longtime union president was able to fend off his opponents—the “Judas element,” he snarled—who protested that Carey had turned into a reckless dictator. Then Paul Jennings, the executive secretary of the IUE district encompassing New York and New Jersey, challenged Carey for the union leadership. Initially, it appeared that Carey had squeaked out the election by about 2,000 votes. But a Labor Department investigation found a miscounting of ballots and the false reporting of results by five pro-Carey union trustees. Jennings, it turned out, had won by more than 23,000 votes.
Although the forty-seven-year-old Jennings had helped Carey cofound the IUE when it split in 1949 with the Communist-led United Electrical, Radio, and Machine Workers of America, the two men were nothing alike. A voracious reader of everything from Churchill and Sandburg to detective novels—known to devour several books in a single night—Jennings was as even-tempered as Carey was irascible. He said that the IUE had made a mistake in letting contract negotiations become “personalized” in the past; from now on, tantrums would not be thrown at the bargaining table.
But none of this meant that Jennings was soft. Associates often referred to him as “tough-minded,” and he was a shrewd tactician. During the 1966 talks with GE, Jennings had pioneered the concept of bringing multiple unions together—in that case, ten of them, in addition to the IUE—to bargain with the company as a single bloc. Observers said that the unions’ ability to coordinate was instrumental in them obtaining a generous contract, with annual 5 percent advances in wages and benefits over the next three years.
Also noteworthy in ’66, the union coalition had swayed GE to raise—by just a tad—its original offer, cracking ever so slightly the bedrock of Boulwarism. But GE was a long way from forsaking its methods. It’s still a “paternalistic, father-knows-best attitude,” John Shambo, the IUE’s lead negotiator in 1969, said a month and a half into talks with the company. “They have this lousy damn position.… They won’t negotiate. They say they are going to do right voluntarily.” Bargaining with GE, he said, was just like “shoveling smoke.”
Despite President Nixon’s request to both labor and management to help curtail inflation, it was obvious what the IUE and the dozen other unions allied with it were out to accomplish in ’69: “GE’s workforce—pinched by soaring prices—is hungry for a substantial raise,” Business Week noted. And Jennings and the other union leaders in his coalition were committed to feeding their members.
By the end of September, GE officials were becoming anxious. “It is our conviction that if a strike does occur it will likely be a long one,” Phil Moore told the company’s managers. “The IUE-coalition strategy seems aimed only at getting a strike started, and apparently has given little thought as to how it may end—especially if we don’t come through with the kind of concessions they need to claim they have destroyed ‘Boulwarism.’” Moore added, “I hope my analysis is wrong.”
It wasn’t. With negotiators on entirely different pages, union members walked off the job on October 27. The IUE and the others wanted a contract with hourly wage gains of 35 cents the first year, 30 cents the second, and 25 cents the third—a total jump of nearly 28 percent for workers then making, on average, $3.25. On top of that, they were asking for cost-of-living protection and bigger benefits. GE’s offer—which it hadn’t wavered on since originally serving it up, a la the precepts of Boulwarism—rested on a 20-cent-per-hour wage increase the first year, with a call to reopen negotiations on pay during each of the next two years. The company stressed that wages would be increased in 1970 and 1971, but it wanted to leave the size of the increase open until later, since both sides would then be in a better position to judge what was happening with inflation. The company’s chief negotiator, John Baldwin, said it was “the best offer ever in GE history.” Paul Jennings said it was among “the worst.”
Just like in 1960, violence flared right away on the picket lines. In Schenectady, about 3,000 union members linked arms and encircled the GE plant, trying to keep anyone from entering; 18 people were arrested. At a GE factory in Cicero, Illinois, police cleared out demonstrators with Mace and clubs. But the biggest blow—at least as far as the company was concerned—was delivered just a couple of days into the strike by the federal Appeals Court in New York: the judges affirmed the NLRB’s finding that GE had failed in 1960 to bargain in good faith.
The company, the court said, had exhibited “a pettifogging insistence on doing not one whit more than the law absolutely required, an insistence that eventually strayed over into doing considerably less.” Throughout the contract talks, the judges found, GE had “displayed a patronizing attitude towards union negotiators inconsistent with a genuine desire to reach a mutually satisfactory accord.” And they concurred with the NLRB that the company’s direct communications with employees on contract issues had led to a lack of honest give-and-take with the IUE. “We hold that an employer may not so combine ‘take-it-or-leave-it’ bargaining methods with a widely publicized stance of unbending firmness that he is himself unable to alter a position once taken,” the court said. “Such conduct, we find, constitutes a refusal to bargain ‘in fact.’ It also constitutes… an absence of subjective good faith, for it implies that the company can deliberately bargain and communicate as though the union did not exist, in clear derogation of the union’s status as exclusive representative of its members.”
The IUE pounced on the ruling, contending that it obligated GE to raise its existing offer. The strike of ’69 Jennings said, “has been provoked by the same methods condemned by the court as unlawful.” To no one’s surprise, GE interpreted things much differently. “We can’t conceive of anything out of the court ruling that would require us to enlarge our current proposal,” said a spokesman for the company, which nonetheless vowed to appeal. The court may have wounded Boulwarism, but it was plain that the union was going to have to persevere on the picket lines to finish it off. Jennings, who had rid the IUE of its internal strife, seemed ready. “We’ll hold out as long as we have to to get what we deserve,” he said.
On November 7, the Federal Mediation and Conciliation Service pulled company and union negotiators back to bargaining for the first time since the strike began. Yet neither side was ready to give an inch, and the talks promptly broke off. When they resumed more than a week later, a GE official hoped that things would now go better. They didn’t. “We got twenty-two no’s,” said a union spokesman.
The strikers hunkered down—and, unlike in 1960, the solidarity among the 130,000 strikers was impressive. Groups of workers bought meat in bulk and stored it in commercial lockers that they rented together. At IUE Local 301 in Schenectady, a posting on the wall advertised “immediate job openings” for part-time work at area retail stores gearing up for the holidays, giving union members a way to supplement their twelve dollars a week in strike benefits. Mohawk National Bank spotted a chance to be a good neighbor—and to generate a little business. “Need Help? See Us For a Loan,” read the sign it placed atop a building on Erie Boulevard. At Bond’s clothing store, the manager said he’d allow strikers to wait until ninety days after a new contract was reached to pay their bills. A dentist in town said that his patients who were GE employees were seeking a similar reprieve, while others were missing their checkups altogether. “They prefer to eat first and worry about their teeth later,” he said.
Despite the hardships, the IUE gave no hint of relenting. At an emergency convention, 500 delegates voted unanimously to ensure that the IUE’s strike fund wouldn’t go dry by having the union’s hundreds of thousands of members at companies other than GE contribute an amount equal to an hour of their pay every week while the walkout lasted. “The union has come of age,” Jennings said after the vote, “and we’re going to win.” This wasn’t baseless boosterism. The longer the strike dragged on, the rougher that things got for GE, where production was running at only about a quarter of its normal rate.
In late November, the AFL-CIO tried to further tighten the screws on the company by calling for a national boycott of its products. GE dismissed the ban as “public posturing,” while simultaneously stewing over the negative effect that it could have vis-à-vis the fast-gaining Japanese and Germans. “Foreign goods,” said Chief Executive Fred Borch, “will flow into any vacuum.” GE reminded its workers that, in this way, scaring off customers in the short run might lead to fewer jobs in the long run. A boycott “almost always hurts the very people it is supposed to help,” a company official said. Merchants around the country, for their part, stated that the AFL-CIO’s campaign wasn’t cutting into business very much; the whole thing was kind of a flop.
But as the GE strike stretched into its seventh week, the economies of the 135 cities across the United States where the company had factories were starting to sputter. “Sales are way down,” said the manager of a department store in Erie, Pennsylvania, where thousands of GE strikers lived. “The banks are starting to feel the pinch, too, I hear.” In Lynn, a car dealer said the stoppage had caused a 15 percent falloff in sales. In Pittsfield, where GE workers were foregoing about $1 million in total payroll each week to stay on strike, some store owners said the walkout was responsible for a 25 percent decline in business. Over time, the pain would only get worse, with suppliers and customers also affected. Carrier Corporation, an air-conditioner manufacturer, laid off 350 employees, or about 10 percent of its hourly workforce in Syracuse, because it couldn’t procure equipment normally produced by GE. Consolidated Edison told New York City residents to brace for summer blackouts because the gas-fired generators it had on order with GE weren’t being delivered. For GE itself, the strike was also now taking a stiff toll, wiping out most of the company’s profit for the fourth quarter.
On December 6, GE blinked. It scrapped its original idea of reopening negotiations on wages in 1970 and ’71 and instead said that it would increase pay at least 3 percent in each of those years—and as much as 5 percent, depending on the cost of living. Although Borch was adamant that this was “the maximum economic package GE can make” and no third offer would be forthcoming, some saw it as an extraordinary gesture, a historic backpedaling from Boulwarism. “A strong argument can be made that the company has junked the most basic elements of the take-it-or-leave-it approach GE unions always found so infuriating,” said A. H. Raskin of the New York Times. But the IUE and the other unions didn’t rejoice. Rather, they rejected the company’s new proposal as “a hoax” and came back with a fresh offer of their own: a sixteen-month contract with an immediate 11 percent wage increase, built-in adjustments after that based on inflation, and a host of other benefits crammed into this tighter time frame.
The two sides then met for a few days, but old habits die hard: the unions charged GE with refusing to bargain and ended the negotiations, while the company said the unions were being “irresponsible.” The union coalition “is so locked in that we can’t make any real progress,” said a GE executive. “They are out to beat us down.” Wrote Raskin: “Boulwarism may be dead, but the end of the strike is no closer.”
Even as the holidays drew near, the unions’ resolve never flagged. “The company has sought to lure strikers back” to work “on grounds that their families should not suffer a dreary Christmas,” the Associated Press reported. But “the strategy,” the AP said, “appeared to backfire.” The AFL-CIO was about to write a $1 million check to replenish the GE strike fund. And the picket lines were fuller than ever. “People think this is a strike for a few cents an hour,” said Ralph Boyd, a GE worker in Schenectady. “But it is about human dignity. It is about the workingman’s right to organize, and it is about an employer’s duty to bargain.… For those issues, I would rather starve than surrender.” Christmas came and went; so did New Year’s.
Then, on January 7, 1970, the head of the Federal Mediation and Conciliation Service entered the fray. For three weeks, he shuttled between GE and the unions before, finally, ninety-five days into the strike, he announced that the two sides had come to terms. The agreement would give GE workers a 25 percent wage increase over forty months, plus additional cost-of-living adjustments, if needed. Boulwarism had been defeated not only at the bench (the Supreme Court would decline to hear the unfair labor-practices case, letting the earlier ruling against GE stand) but in the trenches, too. Union leaders were jubilant, saying that this was the first contract that had been legitimately negotiated with GE since Boulwarism was born. Everything prior had been “articles of surrender, like the Japanese signed on the battleship Missouri,” said one labor official. Exclaimed another union staffer: “We did it. They said we couldn’t, but we damn sure did it.”
GE executives denied that they’d given up much between their first and final offers. “We stayed in the ballpark,” said one. “We just moved the fences a little.” But even they had to confess that an era had come to an end. “Boulwarism just does not work today,” admitted a company official. Boulware himself, now retired in Florida, said privately that he had “a deep sense of guilt that I did not—with all the opportunity I was given—leave behind a better preventative against” a long strike.
Still, the unions’ triumph was double-edged. Slaying Boulwarism meant winning a contract that was, by most accounts, inflationary. “The Nixon administration and the national economy are among the losers,” said Time magazine. “Such an increase, granted by one of the nation’s hardest-bargaining employers, may well embolden other union leaders to hold out for hefty increases in different labor negotiations later this year.” That scenario would help to bring about more inflation, just as economic growth was slowing down. And that toxic mixture—high prices and high unemployment—would do far more to grind down America’s workers than Boulwarism ever did.
The year 1970 was rotten for the United States economy. The recession, which had begun in December 1969 and would last until the following November, would end up being the mildest of the five slumps since World War II. But it was a recession nevertheless. Output shrank. The unemployment rate increased from just over 4 percent in the first quarter to nearly 6 percent in the fourth. Productivity lagged. Corporate profits shriveled. Even with all of this slowing, inflation remained elevated, barely abating from the year before. Big labor agreements, like the one reached at General Electric, put workers ahead—but hardly. They were forever catching up to rising prices; the treadmill wouldn’t stop. Many of those monitoring the numbers, including those inside the Nixon administration, were baffled. “We underestimated the inflationary expectations,” said Charls Walker, the undersecretary of the treasury. “We didn’t expect that it would be so tough.”
Working families got by the best they could. Women smeared their faces with vegetable shortening, instead of expensive cold cream, to remove makeup. When Hunt-Wesson Foods published a booklet of cheap recipes titled We’ll Help You Make It, the company received 850,000 requests for copies. Personal-finance columnist Martha Patton of the Chicago Daily News had an even simpler solution. “Never market when hungry,” she advised her readers. In New York, some put on “Beat Inflation” parties with menus that recalled World War II rationing: canned tomato soup, cheese on Ritz crackers, and sweet-and-sour Spam.
If this winding down of the nation’s postwar boom were somehow lost on anyone, the tragic death in May of Walter Reuther surely served as a sign of the fall. The United Auto Workers president and his wife were killed with several others in a plane crash in the woods of northern Michigan. He was sixty-two years old. A large group of luminaries—Golda Meir, Cesar Chavez, Coretta Scott King, General Motors CEO James Roche, and Henry Ford II, among them—sent their condolences and paid their tributes. But the most poignant outpouring came from thousands and thousands of men and women without any fancy titles or speeches to make. “We felt so close to him because of how much he had done for workers like us,” said Clarence Rydholm, a GM retiree who filed along the royal blue carpet inside the Veterans Memorial Building next to the Detroit River where the Reuthers lay in state. Outside, a light rain fell. “He bargained for the broom pushers like me,” said Sam Smith, who came to pay his respects on his way to work, carrying his metal lunch pail past Reuther’s oak casket. “He wanted the laboring man to live good and make money like others with prettier jobs.”
That mission—to help the laboring man live good—was to be taken up by Reuther’s replacement, Leonard Woodcock. He had been with the UAW for thirty-five years, and until now, he’d held the most important post next to the presidency: directorship of the union’s General Motors Department. As one might imagine, as soon as he took the top job at the UAW, Woodcock was constantly being compared to Reuther. He managed to hold his own. Intelligent and articulate, Woodcock showed an excellent command of the long-term trends jeopardizing the financial security of his members and working folks in general, including overseas competition and automation. “It’s easy to be for free trade when you don’t have a problem,” Woodcock said. “The test comes when it begins to impinge upon the jobs of our people.” To forecast what technology might mean for employment, he proposed creating a National Department of the Future.
But it was here, in the present, where Woodcock, a man known affectionately inside the union as “Timber Dick,” was being asked to really show his stuff, as the UAW prepared to face off with GM and the other automakers over a new three-year contract. Union members’ wages had gone up by 6 percent a year under their 1967 agreement—but that was all on paper. Inflation had consumed the entire increase and more, so that workers’ purchasing power was now nearly 7.5 percent behind where it started. Part of the reason for this slippage was that Reuther had agreed in ’67 to cap the cost-of-living formula, giving away the union’s unlimited defense against higher prices. Before he died, he said this was the biggest mistake of his life.
Besides fighting for higher pay and restoration of the full COLA, the UAW had one other main demand: after thirty years of service, no matter their age, the union wanted workers to be able to retire at a pension of $500 a month. “Thirty-and-out” became the rank-and-file’s mantra. Behind this sentiment for many older workers was a yearning to get past the dead-end dullness and degradation that had long been the fabric of factory life. In 1964, to the surprise of the union leadership, the rank-and-file had forced a strike at General Motors over conditions in its plants. “The strike is not about money,” Reuther told GM. It is “about the human use of human beings.… It is a revolt against the concept, implicit in the corporation’s attitude, that it owns the workers whom it employs—that they are mere extensions of the production process.” The contract reached after the month-long walkout gave workers some comfort, such as more relief time on the assembly line. But it wasn’t enough to quash the feelings of ill temper among the industry’s old-timers. They were worn out and ready to be done.
Younger hourly employees, under the age of thirty, were also restless, maybe even more so. They now made up more than 40 percent of the UAW’s membership, and they’d been stricken with what became known as “blue-collar blues.” Many drowned themselves in drugs or alcohol. “I knew a lot of guys they’d never make it home Friday nights from the bars,” said James Beeman, a GM worker. “They’d spend their whole check on the way home, then on Monday morning they didn’t even have coffee money. It was a problem… but I don’t blame the people. I blame the type of job.”
Yet blue-collar employees didn’t just drink up; they also pushed back, exerting what historian Stephen Meyer has identified as a “youthful working-class militancy.” Conflicts between the UAW and the automakers at the plant level—over the speed of the line, the cleanliness of bathrooms and cafeterias, the manner in which supervisors would discipline people, and assorted other particulars—proliferated. At GM alone, local demands went from fewer than 12,000 in 1958 to 24,000 in 1964 to 39,000 in 1970. Then, too, there were the workers’ unofficial actions: many played hooky, as the rate of absenteeism in auto factories rose to 5 percent in 1970, double where it had been in the 1950s and most of the ’60s. On Mondays and Fridays, it was not uncommon to have 10 to 15 percent of the workforce as no-shows. When they did report, they behaved badly. Some even sabotaged the vehicles being built, slashing seat covers, scratching paint, bashing in radios, and tearing out glove-box doors.
The General Motors plant in Lordstown, Ohio—a sleek new structure that produced the Chevy Vega, a subcompact designed to compete with the rapid influx of foreign cars—would emerge in the early seventies as the national poster child of these tensions. (The alternative name for “blue-collar blues” was “Lordstown syndrome.”) Attendance at the factory was atrocious and discipline poor. “These workers reflect the changing lifestyle of today’s youth,” the Akron Beacon Journal told its readers. “Many wear their hair shoulder length, have grown mustaches or beards, and come to work in hip-hugging, bell-bottomed trousers. They are probably better educated than any generation of workers in the history of American industry. They were taught to question traditional values and encouraged to stand up and be counted.”
In answer to the disgruntlement, GM got tough. The company ordered time-and-motion studies, furloughed hundreds of “unproductive” workers, and introduced mandatory overtime. Then, GM cranked up the line, so that it spit out at least one hundred cars per hour, more than twice the number that workers back in the fifties thought was oppressive. A Lordstown laborer said that the company had “taken away the time to scratch your nose.” Some were left black and blue from trying to keep up the pace. For other workers, it wasn’t just their bodies that were beaten. “It felt like I was losing my mind,” said one.
The blue-collar blues weren’t being sung only at GM or the other auto companies. “This place is more mentally depressing than physically,” said John Shindledecker, who worked at Coca-Cola’s Chambersburg, Pennsylvania, bottling plant. “They should make each employee feel important and needed.” At Kodak, workers in Rochester started skipping out on their jobs so frequently that the company issued a bulletin saying it “must have employees who can be depended upon.” At a General Electric facility in Erie, Pennsylvania, distrust led management to install closed-circuit TV cameras and open microphones. The local union was livid. “There are institutions in which the inmates are kept under constant surveillance—jails and mental hospitals,” it said. “Animals in a zoo are likewise exposed against their will to the gaze of others. But the employees involved here are human beings, not animals.… We repeat, they are human beings—not monkeys or jail birds, or nuts.”
Production workers weren’t the only ones so distraught. “The blue-collar blues is no more bitterly sung than the white-collar moan,” Studs Terkel wrote in his 1972 book Working. “‘I’m a machine,’ says the spot-welder. ‘I’m caged,’ says the bank teller, and echoes the hotel clerk. ‘I’m a mule,’ says the steelworker. ‘A monkey can do what I do,’ says the receptionist. ‘I’m less than a farm implement,’ says the migrant worker. ‘I’m an object,’ says the high-fashion model. Blue collar and white call upon the identical phrase: ‘I’m a robot.’”
Yet it was on the auto assembly line, where the alienation seemed to be greatest, that many employees—the younger ones especially—were all too happy to give their employers less than their all. “The young men and women workers saw no reason to work to the bone,” William Serrin, who covered the scene for the Detroit Free Press, has written. “Their fathers hated the drudgery, the repetition of the assembly line, but they were older men and older men are not rebellious; they had seen the Depression and they remembered it; they also knew what it had been like in the plants in the days before the union; and they had, in their years in the plant, come to accept plant life as the way plant life was meant to be. The younger workers had not; often, they quit or stayed home, or harassed the foremen. Fuck this, the younger workers said.”
For GM, the problem wasn’t so much their workers’ outrage as it was their output. All of this agitation translated into low productivity. And low productivity was seen as the culprit for high inflation. “It is important to recognize that the basis—the only basis—for a rising standard of material well-being is rising national productivity,” James Roche, GM’s CEO, told a business luncheon in St. Louis in February 1970. “This is a fact of economic life. It is as true when, as in the recent past, we were caught in an inflationary spiral, or when we were enjoying relative price stability.”
Between 1959 and 1965, Roche said, output per man-hour and compensation per man-hour had increased in lockstep—each rising about 25 percent over that period. But from 1965 to 1969, the two decoupled: compensation kept going up at the same clip but output slackened to less than 10 percent. According to Roche, as unit labor costs rose, prices followed. “Although some groups of workers may have pushed up their compensation faster than others,” he said, “no one really gained from this inflation: not the employees, not the companies, not the consumer. Inflation is really nobody’s friend.”
For Roche, the blue-collar blues had to be cured—though he put the burden for doing so almost entirely on those who manned the line. It was as if the company had no role whatsoever in its workers’ disaffection. “Absenteeism lessens the effectiveness of all employees,” Roche said. “It undermines the foundation on which efficient production depends. It cuts into the quality standards of the product. It carries a price for all workers—the present and the absent alike—and ultimately the consumer.… As we face up to our national crisis of cost, American industry continues to be willing to make the investment and take the risk necessary to a continued rise in productivity.… The vital question is: Are the unions and the individual employees willing to live up to their end?”
Roche ended his speech by looking at the contract bargaining ahead—and reiterating the need to have wages conform to output. “In the negotiations of 1970,” he said, “unions and management must strive together to achieve regular attendance, eliminate unnecessary work stoppages, and cooperate in improving quality. We must restore the balance that has been lost between wages and productivity. We must receive the fair day’s work for which we pay the fair day’s wages. For upon this balance rests our national ability to cope with inflation.”
In September, GM and the UAW exchanged proposals. They went nowhere, and the usual choreography commenced: more than 340,000 workers walked off the job. Days on the picket lines dissolved into weeks. Morale among the strikers held up even as they collected food stamps to scrape by. Tens of millions of dollars in losses piled up for GM. The financial fallout extended to the company’s suppliers and showrooms. The union strike fund drained. Talks suddenly intensified. And then, fifty-eight days into the stoppage, an agreement was hatched.
In between the strike and the settlement, GM and the UAW sparred primarily over wages and who should pay for inflation—past and future. The company proposed a nearly 10 percent increase in wages in the first year, to be rounded out by a gain of 3 percent in each of the next two years. Woodcock called GM’s tender “less than equitable.” Only in 1970s America would 10 percent be scorned as the offer of a skinflint.
The union wanted a 15-plus percent pay increase out of the gate. (Nearly half of the total, it suggested, was essentially back pay owed to employees because of increases in the cost of living since 1967.) The UAW said it couldn’t yet ask for second- and third-year raises until it knew whether it was going to win another demand that the company opposed: a COLA with no ceiling. Earl Bramblett, GM’s top negotiator, called the UAW position “extreme.” But the union had no interest in Bramblett’s critique or Roche’s sermons on productivity. It favored reaching back to Charles Wilson’s words in 1948, as he put in place GM’s first COLA and thus made possible the Treaty of Detroit two years later: “The working people did not make… inflation. They only want to catch up with it in order to pay their grocery bills.” With the union now invoking old “Engine Charlie,” it’s safe to assume that he was no longer the most revered figure in the GM pantheon, if ever he had been. “We would like to go out and piss on his grave,” said one executive.
The final contract split the difference on pay. The first-year raise was about 13 percent, with annual 3 percent increases after that. But on the COLA, the UAW scored big: the unlimited escalator was reinstated. The union also received much of what it wanted on “thirty-and-out.” The company had hoped to limit the full $500-a-month retirement benefit to those fifty-eight and older. But it agreed to drop the age requirement to fifty-six and opened the door to it being lowered even more in future years. For many workers, early retirement was their prime motivation for having gone out on strike. “All I have to look forward to is ‘thirty-and-out,’” said Pete Tipton, a welder at Cadillac.
For the company, however, the policy was troubling in a couple of respects. First, it threatened to hasten the exit of some of GM’s most skilled and experienced people—a potentially “crippling blow,” Bramblett had said at the start of negotiations. And, second, it heaped more expense on the company in an area that seemed to be lurching out of control: “fringes.” Over the previous ten years, hourly wages at GM had gone up by about 55 percent. But the cost of fringe benefits, for insurance and pensions, had swelled by more than 230 percent. GM was no outlier, either. Over the next few years, worries would grow that the employee-benefits system being created across much of American industry was unsustainable, especially for pensions. “There is a distinct possibility that the economy in the future will not be able to support all of the retirement benefits which are being promised,” said Dan McGill, of the University of Pennsylvania. “It is possible to promise too much.”
In the short term, though, GM had bought three years of calm on the labor front; to pay, the company jacked up the price of its cars for 1971 by the largest amount in a decade. For its part, the UAW had gotten most of what it wanted—arguably a “fantastic victory,” said the New York Times. But neither side had done much, if anything, to heed President Nixon’s entreaty to quell inflation. Woodcock maintained that the multibillion-dollar agreement wasn’t really inflationary. And Bramblett, having evidently forgotten Roche’s lessons about what happens when labor costs outrun productivity, said that inflation “evolves out of the pressures in our economy which are beyond the control of either party.”
The White House didn’t accept any of that. It denounced the contract—and fretted over what it might portend. “If everyone in his turn gets as big a wage or price increase as the biggest obtained by others during the height of the inflation,” said the Council of Economic Advisers, “the inflation will go on endlessly.” The GM agreement did set a pattern, not only at Ford and Chrysler and other auto companies, but in copper and aluminum, in aerospace, at the US Postal Service, at American Telephone and Telegraph, at US Steel, and elsewhere. By the end of negotiations in 1971, the number of employees covered by COLA clauses had doubled to nearly 60 million. Many of those working at nonunion companies also saw big nominal gains in pay—the spillover of organized labor’s battles—as did white-collar employees.
On the face of it, American workers were doing better all the time, just as they had since the end of World War II. But things were very different now. With the cost of living rising perpetually higher and the economy stalling, the Golden Age was fast losing its luster. Instead of sharing in their employers’ riches, employees were now grabbing furiously for whatever they could. Instead of being built up on a foundation of strength, the social contract was resting on a wobblier and wobblier frame.
By 1971, the United States had technically pulled itself out of recession. But high prices were still rampant, even though unemployment lingered at 6 percent. “The rules of economics are not working the way they used to,” Arthur Burns, now the chair of the Federal Reserve, told Congress in July. “I wish I could report that we are making substantial progress in dampening the inflationary spiral. I cannot do so.” In August, believing that he had nowhere left to turn (and with a bunch of voices bellowing in his ear, including that of the Committee for Economic Development), President Nixon went back on his word and ordered a freeze on wages and prices. Washington hadn’t meddled in the marketplace this much since the New Deal. Business and labor were both dumbfounded. So were many in Nixon’s own administration. As one high-ranking official reflected, “The president made a new economic policy out of all the things we had been saying weren’t needed and couldn’t work.”
At first, the so-called Nixon Shock did work. After an initial ninety-day freeze, the president established a Price Commission and a Pay Board, the latter of which consisted of appointees from the public, labor (including the UAW’s Leonard Woodcock), and business (with GE’s Virgil Day chairing that part of the panel). The board aimed to keep annual wage increases to 5.5 percent, and though it didn’t always succeed, it challenged more than a hundred labor contracts and its presence helped to ease “the psychology of inflation,” as Day said. Consumer prices edged down. The other bold features of the president’s plan—to end the automatic convertibility of the dollar into gold, a mainstay of international finance since 1944, and to levy a surcharge on imports—helped to make American companies more competitive against foreign firms (if only artificially so).
The Nixon administration also upped its spending, and the Fed lowered interest rates, pumping more money through the economy. Output took off. The nation was finally making real headway against both inflation and unemployment. It was a masterful steering—some would say manipulation—of the economy, helping the president win reelection in 1972 in a landslide over George McGovern. “People can see an improvement,” said Harvard’s Otto Eckstein, a Democrat who had served on President Johnson’s Council of Economic Advisers. His own grade on Nixon’s handling of the economy, he told the press, had gone from a D to an A minus.
But it wouldn’t be long before Nixonomics flunked. In early 1973, worried that wage and price controls might become a permanent crutch, the administration scaled them back. Big business was pleased. “It is time to return to the self-regulating discipline of a competitive marketplace,” said Richard Gerstenberg, who had taken over for Roche as GM’s chairman and CEO in 1972. “It is time to give our economy’s built-in system of checks and balances a chance to work again.” It didn’t. Inflation went straight through the roof, reaching nearly 9 percent for the year. In October, reacting to the demise of the gold standard and Nixon’s devaluation of the dollar (as well as, most immediately, US support for Israel in the Yom Kippur War), the Organization of Petroleum Exporting Countries put in place an oil embargo, and the cost of crude quadrupled, adding still more inflationary pressure. Consumer prices rose more than 12 percent in 1974; wholesale prices bounded upward more than 21 percent.
Tripped up by OPEC, the economy also tumbled back into recession, a much longer and more calamitous downturn than the last one. The stock market crashed. The official unemployment rate would reach more than 8.5 percent this time around, though the actual figure was probably twice that big. (Nixon himself was out of a job by August 1974 in the wake of the Watergate scandal.) The one-two punch of historically high inflation and joblessness became known by many different names: “slumpflation,” “infession,” “inflump,” and, most of all, “stagflation.” Arthur Okun of the Brookings Institution added up the two rates to create a new economic indicator: “the Misery Index.”
For America’s workers, it was miserable indeed. Outplacement services, a new industry dedicated to helping companies reduce head count, caught on. By late 1974, GE had laid off half of the employees at its sprawling Appliance Park in Louisville, Kentucky, or about 12,000 people. GM had idled about 100,000, or 20 percent of its entire labor force. Several thousand more salaried employees took early retirement under a new program to lower costs. Watching those at his facility bid farewell “was the most emotionally charged experience I had with GM,” said Walter Huppenbauer, a personnel administrator at the company’s South Gate, California, plant.
Time, which just a decade earlier had put a smiling portrait of John Maynard Keynes on its cover while it sang of the seemingly limitless virtues of the New Economics, now asked this on the front of the magazine: “Can Capitalism Survive?” While the question was a bit hyperbolic, what was ailing the nation couldn’t be fixed with a simple jolt of confidence, a push for companies to size up the consumer and sell more, the way that General Electric had advocated in 1958 with Operation Upturn. The problems of business ran much too deep for that.
Corporate profit margins were sinking fast—from more than 15 percent through the 1950s and 1960s to less than 11 percent in the 1970s. “Profits are to free enterprise what oats are to the racehorse: essential both as a reward and as a fuel for continued competition,” said GM’s Gerstenberg. “Every American should be concerned about the ability of American business to continue to prosper.” The forecast wasn’t promising. Growth in productivity, which had started to slow in the late sixties, was now at a crawl. Looking back, economists would pinpoint 1973 as a defining marker—the beginning of a two-decade stretch in which productivity gains at US companies were less than half of what they had been after World War II. In due course, this drop-off would eat away at wages and benefits and job security, tearing into the social contract between employer and employee. Experts have put forward all sorts of possible explanations for the productivity collapse: the rise in energy prices, shortcomings in public education, a ballooning federal budget deficit, the weight of government regulation, a depletion of mineral resources.
Others have suggested that the wounds were self-inflicted: many American companies had stopped investing in new equipment, leaving their factories to rust well before the term Rust Belt came into use. They also cut back on research and development through the 1960s, so that they merely “coasted off the great R&D gains made during World War II,” said C. Jackson Grayson, president of the American Productivity Center. As often happens to hegemons, any number of US corporations had gotten stupid, fat, and lazy. “Especially in large organizations,” said one executive quoted in Harvard Business Review, “we are observing an increase in management behavior which I would regard as excessively cautious, even passive; certainly overanalytical; and, in general, characterized by a studied unwillingness to assume responsibility and even reasonable risk.”
Whatever the case, other nations could now exploit America’s weaknesses. Countries such as Japan and Germany, which were flat on their backs after the war, had become economic powers. At the outset, America welcomed their revival, as they provided expanding markets for US companies to export their goods. But in time, America’s trading relationships got spun on their head. Foreign companies borrowed technical insights and management techniques from the United States and made them their own. In some instances, they made them much better. Germany and Japan leapfrogged America in steel, automobiles, machine tools, consumer electronics, and other industries. Other countries and regions, including Hong Kong, Korea, Singapore, Brazil, and Spain, also stepped up their exports through the seventies. In 1971, imports into the United States exceeded exports for the first time since 1888. By 1976, the United States would swing to a trade deficit that remains unbroken to this day.
This flood of goods from overseas presented a paradox for American households. On the plus side, it gave them access to cheaper items of superior quality. For example, by the early 1970s a Japanese sedan cost 45 percent less than a comparable model built in the United States. American autos were likely to have more of only one thing: defects—twice as many as their Japanese counterparts. As a customer, all of this was so delightful that 100,000 Hondas would be sold in the United States in 1975, up from fewer than 1,500 in 1970. As an employee, though, such intense competition was disconcerting. Or at least it should have been. One reason Japan had a leg up, GM was quick to point out, was that the total compensation received by its factory hands was far less than the pay and benefits for American autoworkers—about 60 percent less in 1974. In coming years, the car companies would use this differential to pull concessions from the UAW.
Other unions were similarly put on the defensive. For a moment in the early seventies, it seemed as if organized labor might be given an injection of vitality from new members who had been radicalized in the antiwar, civil rights, and feminist movements. The discord at GM’s Lordstown facility had been a signal to some that a more combative expression of unionism was taking hold. But it wasn’t to last. “The unrest of the early decade was based on the most successful economy in American history—simply put, in terms of class power, most workers never had it so good,” Vanderbilt University’s Jefferson Cowie has written. “Once the rug of economic success was pulled out from underneath workers during the bitter recessions that began with the first oil shock in 1973, they lost their footing in their fights for solutions to their discontents.” At that point, “the economy drifted toward stagnation: Industrial capacity plummeted, unemployment rose to its (then) postwar high, foreign competition eroded market position, rising interest rates prevented plant modernization, and holding down wages and benefits became the central goal of corporate strategies as inflation eclipsed unemployment as political enemy number one.”
In 1974, an ominous milestone was reached: Americans’ wages declined. It was the first time that this had happened since the end of World War II. Even during previous recessions, wages had gone up. But no more. Although no one could have foreseen it at the time, this 2 percent dip would mark what commentator Harold Meyerson has called “a fundamental breakpoint in American economic history”—the onset of a forty-plus-year period in which people’s paychecks would barely get any bigger once inflation was taken into account.
Through the 1970s, companies also shifted work to less costly countries, driven in part by a long-standing set of US trade policies that sought to open up American markets to goods made overseas. Washington’s aim was to stitch together a world that was economically interdependent and, as such, would stand as a bulwark against Soviet aggression. In 1965, American businesses invested less than $50 billion in foreign factories, offices, and equipment. Ten years later, that number increased to more than $120 billion, and by 1980 it would rise to more than $210 billion. GM, for one, had operated plants abroad since the 1920s to serve those local markets. But now, its international factories began to make parts and cars to sell back in the United States. GE spread its operations overseas as well—and then tried to enlighten its workers on why any other path was imprudent given the globe’s growing interconnectedness. “Stop foreigners from flooding US markets with their goods?” the company asked in an employee newsletter. “Stop US companies from setting up shop overseas? Stop exporting US technology? Stop world trade?” Putting a halt to any of this, GE said, would be counterproductive for the company, its workers, and the nation. As if to prove the point, GE added 30,000 jobs abroad during the 1970s—though over the same period it cut 25,000 positions at home.
Other jobs were, by their nature, more resistant to being sent offshore. And these service occupations accounted for a larger and larger share of the US economy, overtaking manufacturing as the primary way that people across the country made a living. By the midseventies, about 60 percent of Americans worked in services, as the nation transitioned into what sociologist Daniel Bell dubbed a “post-industrial society.” But these jobs had a real disadvantage. “It happens to be the poorest-paid sector,” Gus Tyler, a top official of the International Ladies Garment Workers Union, told a symposium of business leaders gathered in Washington in the summer of 1974.
Paul Austin, the CEO of Coca-Cola, had invited Tyler—along with former commerce secretary Pete Peterson, the Urban League’s Vernon Jordan, Trilateral Commission chairman Zbigniew Brzezinski, and others—to try and help make sense of the turbulent times. According to Tyler, the “new class” of employees replacing those in manufacturing included some who would do just fine: college-educated knowledge workers. But many others would have a hard time keeping up. Behind the hotel manager, Tyler said, are “all those little people that do the sweeping and making of the beds. In a hospital, it’s the doctor, but behind the doctor stand twenty or thirty people who are not doctors at all. They just scrub and wash and move dirty pans. At an educational testing service you have a few brainy professors, and you have several thousand little ladies who just punch holes into little cards.”
Actually, even those with knowledge jobs were being buffeted by change. There is “a need for less structured offices throughout our organization to enable quick decisions with full participation in an increasingly competitive world,” a young Coca-Cola manager told Austin when asked for his biggest takeaways from the symposium. “The world of tradition and loyalties is rapidly disappearing.” It was, without question, a different environment than the one in which Austin had come up. He had joined Coca-Cola in 1949 with a Harvard Law degree and the can-do spirit of someone who had been an oarsman on the 1936 US Olympic rowing team and the commander of a PT boat during the war. For the next twenty years, he had climbed steadily up the corporate ladder. But this young manager was very perceptive. The kind of linear career that Austin had was about to become a relic. The Organization Man was dying.
Alvin Toffler, in his bestselling 1970 book Future Shock, prophesied that the companies that would do well in the years ahead were those that were most nimble, paring back their bureaucracy and fostering an “ad-hocracy.” “Instead of being trapped in some unchanging, personality-smashing niche, man will find himself liberated, a stranger in a new free-form world of kinetic organizations. In this alien landscape, his position will be constantly changing, fluid, and varied. And his organizational ties, like his ties with things, places, and people, will turn over at a frenetic and ever-accelerating rate.”
In the meantime, the title that Austin had picked for his little confab couldn’t have been more perfect: “The World We Know No Longer Is.”
The chairman of the Committee for Economic Development, Philip Klutznick, stood before his trustees and invited guests in New York City in January 1975 to talk about the economy. It was still performing dreadfully. “In Talmudic fashion,” the wealthy real-estate developer said, “we argue over which is worse, an inflation or a recession, and which is best, a tax increase or a tax cut. Policies designed to deal with one set of problems may serve only to exacerbate another. We need to unlock the conundrum of simultaneous inflation and recession. But to do so, we are turning instinctively—almost nostalgically—to past policies and precedents.”
The fact was, few cared what Klutznick had to say. The CED had lost its glow.
A few years earlier, due in large measure to Virgil Day’s prompting, the Anti-Inflation Roundtable had merged with two other associations to become the Business Roundtable. The new lobby had by now surpassed the CED to become the leading voice of corporate America.
The changing of the guard had big implications. Industry was in a much different spot than when the CED had, in 1943, set forth its vision for all citizens “to work, to live decently… to provide against sickness and old age.” And the positions staked out by the Business Roundtable bore little resemblance to what had come before. “If the group did not completely abandon all concern about the larger public interest,” Mark Mizruchi, a sociologist at the University of Michigan’s business school, has written, “it certainly paid considerably less attention to it than the CED had.” Instead, the Business Roundtable concentrated on shrinking the role of government and organized labor—efforts, Mizruchi has said, that “led to a weakening of these two forces” and “increased the ability of corporations to act without the pressures of… their workers.” This new, more narrowly self-interested agenda would hasten the unraveling of the social contract between employer and employee.
A telltale moment came in 1976 when Sen. Hubert Humphrey and Rep. Augustus Hawkins introduced the Full Employment and Balanced Growth Bill. It was a virtual copy of the Full Employment Act that had been introduced in 1946, in the CED’s early days. Back then, the CED had broken with the Chamber of Commerce and the National Association of Manufacturers to support the idea that full employment should be a public objective. Now, however, the Business Roundtable joined with the Chamber and NAM to gut the latest legislation.
Their principal argument, which they marshaled successfully, was that unless it were killed or completely overhauled, the bill would fan inflation. “While all Americans desire ‘full employment,’ it is unrealistic and less than honest to promise such a result simply through installation of a complex new national planning system, or through the symbolism of legislating an unachievable unemployment goal,” the roundtable’s Lewis Foy told Congress. For any business leader to embrace the CED’s notion that “full employment” should, “like ‘liberty’ and ‘justice’… stand as “a goal of democratic government” had become, in just thirty years, utterly unthinkable.